A proposal floated by academics from Stanford University to slowly phase down the Investment Tax Credit (ITC) instead of cutting it from 30% to 10% has been dismissed by the industry.
Under the plan, the current “cliff” scheduled for the end of 2016 would be replaced with a tax credit that slowly decreased from 30 to zero percent. A new paper suggests that solar will struggle with the cut in support.
“Our prediction is that it doesn’t matter which state you take or which segment you look at; solar would be pretty much uncompetitive by early 2017 in virtually all of the applications,” said Stanford professor Stefan Reichelstein.
“That 10% ITC is still a considerable incentive that should not be minimised in terms of impact,” Reichelstein said. “Under the current tax rules, the industry would take a significant hit in 2016, but then keep significant subsidies. Our thinking was, why do the sharp step down and then support the industry forever if it doesn't need it forever?”
The researchers claim that the stepped approach would pose a series of small “shocks” for the industry that would not be insurmountable and would allow the industry to continue to develop its competiveness. They also claim that the step down approach would be more acceptable politically.
Rhone Resch, president and CEO of the US Solar Energy Industries Association (SEIA) dismissed the plan.
“Unfortunately, the report looks at the solar ITC in a vacuum, without any consideration given to the 100-year history of preferential tax treatment enjoyed by fossil fuels,” Resch said. “This results in a distorted view of reality. Today, solar is following a similar development curve as traditional energy sources, such as oil, gas and coal, which received substantial subsidies during their growth periods and are still getting many of them today. While solar is becoming more and more cost competitive every day, we’re far from having a level playing field in America when it comes to energy production.
“Simply put, the solar ITC has helped to balance the scales and provide some measure of tax fairness,” he added.